Courts (At Least This One) Always Respect Pleadings Made In Good Faith

In this action, a District Court in Maryland held that the amount-in-controversy is decided from the complaint itself, unless it is shown that the amount stated in the complaint is not claimed in “good faith,” or that the plaintiff cannot recover the amount claimed “to a legal certainty.”

The plaintiff, Brey Corp, a Maryland corporation, filed a putative class action in the District Court against LQ Management, a Texas corporation, alleging that LQ violated the Telephone Consumer Protection Act (“TCPA”) by sending Brey two unsolicited advertisements by fax. (Again, we ask. Who still uses a fax machine?)

Brey claimed that the advertisements it received, which were also sent to “thousands of other consumers,” was part of LQ’s “uniform policy and procedure” of sending “unsolicited fax

advertisements to tens of thousands of consumers” over the past four years. (Please excuse me as I pause to allow the horror the plaintiff must have endured for receiving 2 unsolicited faxes wash over me and cause me to shudder.) For each unsolicited fax they received, Brey and the other class members would be entitled to statutory damages of $500 or the amount of their actual loss, whichever is greater. As a result, the complaint alleged that “the matter in controversy exceeds the sum or value of $5 million in the aggregate for the class, exclusive of interests and costs.”

LQ filed a motion to dismiss the complaint, contending that Brey had not established subject matter jurisdiction and had failed to state a claim under the TCPA.

The District Court agreed that TCPA does not provide for federal question jurisdiction but found that Brey had alleged sufficient facts to meet the pleading standards set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), to establish diversity jurisdiction. Additionally, the Court noted that diversity jurisdiction is a proper means for bringing private actions under the TCPA in federal court.

Brey contended that it had alleged facts sufficient to meet $5 million amount in-controversy requirement because it alleged in its complaint that LQ engaged in thousands of TCPA violations via the sending of unsolicited advertisements to “tens of thousands of consumers,” where each violation entitles a plaintiff to recover at least $500.

The Court noted that when the complaint provides an amount-in-controversy, defendants attempting to dismiss “shoulder a heavy burden.” The amount-in-controversy is decided from the complaint itself, unless it appears or is in some way shown that the amount stated in the complaint is not claimed in “good faith.” If the plaintiff claims a sum sufficient to satisfy the statutory requirement, a federal court may dismiss only if it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed. Here, because Brey claimed a sum sufficient to satisfy the statutory requirement, LQ had a high burden to show either that the amount was not claimed in “good faith” or that Brey cannot recover the amount claimed “to a legal certainty.”

LQ contended that this case did not meet CAFA’s $5 million amount-in-controversy requirement under the pleading standard established in Twombly and Iqbal because Brey alleged no predicate facts to support its assertions that LQ transmitted unsolicited faxes to “thousands of other consumers in Maryland and elsewhere throughout the United States.” The Court, however, remarked that, in order to dismiss Brey’s claim at the motion to dismiss stage, LQ must come forward with proof that Brey’s allegation as to the volume of faxing was actually incorrect. But LQ presented no facts to counter the factually supported assumption drawn by Brey that the toll-free fax removal number listed on the unsolicited faxes it received strongly suggested the involvement of a contracted fax broadcaster, which in turn normally means that the fax campaigns at issue ran well in excess of 10,000 transmissions. The Court thus observed that Brey’s factually supported assumption regarding the number of unsolicited faxes sent by LQ rendered its $5 million amount-in-controversy allegation plausible.

Specifically, Brey averred that LQ sent “unsolicited facsimile advertisements to tens of thousands of consumers” over “the past four years” and had put forth enough facts to show that such allegations are plausible. This was all that the Iqbal and Twombly pleading standard requires; Brey needn’t state any and all facts proving its entitlement to relief, the Court maintained. The Court thus concluded that because the TCPA contains no damages cap, and given that each violation results in damages of $500 or more and LQ had allegedly engaged in “tens of thousands” of such violations, a $5 million damage award was plausible.